Long Beach utility tax cut passed in 2000 has resulted in $354M less revenue

LONG BEACH - It was criticized as disastrous to Long Beach's fiscal health and hailed as the rightful return of money to taxpayers.

But whatever it was when voters passed it in 2000, Measure J, which reduced the utility users tax from 10 percent to 5 percent, can at least be quantified now.

Halving the tax added to water, gas, electric and phone bills has resulted in $354 million less revenue for city coffers, according to numbers provided to the Press-Telegram by the city's Budget Management Bureau.

That contributed toward decisions by city leaders to cut spending by $209 million, largely on the back of public safety, the biggest portion of the budget, and eliminate 811 jobs since 2004.

How those dueling nine-figure numbers are viewed depends on what side of the still-smoldering debate over Measure J one sits.

At least one elected official believes in putting the utility tax issue before voters again, this time as an increase.

"A lot of the cuts we've had to make are, in my opinion, outrageous," said Councilwoman Rae Gabelich.

Gabelich acknowledged that good things have come from the reduction to the tax - Long Beach government has been forced to become more efficient, and things such as a $175,000 annual discretionary fund for each council district have been eliminated, for example.

But the scaling back has gone too far, Gabelich argues, when there is talk about eliminating one of the Long Beach Police Department's four substations and dropping crews on certain fire engines from four to three.

"I don't think it's positive for the citizens," she said.

To Gabelich, raising the utilities tax is one of the most attractive revenue-gathering options to stem the rollbacks - each 1 percent increase nets $8 million for the general fund, she said, and a full 5 percent pick-up would cost users $12.50 on a monthly bill of $250.

The increase may not sound like a lot to someone who lives in Belmont Shore, he said.

"If you're someone living in Central Long Beach or downtown, it makes a big difference," said Baglietto.

The driving force behind Measure J was former Long Beach resident Norm Ryan, who had a brief and frenetic political career in the city that included unsuccessful campaigns for council and mayor.

Opponents of the initiative said that reducing one of the city's largest revenue sources by half would lead to painful cutbacks to city services, including police and fire.

The city-sponsored Measure I sought a smaller reduction to the utilities tax, to 7.5 percent, but Measure J ultimately received more votes.

Ryan eventually moved to Shasta County to take a position as chief executive officer of the Haven Humane Society in Redding. He was convicted in 2009 of five felonies for embezzling about $1,400 from the nonprofit animal-control authority and sentenced to 180 days in jail.

The push to undo Ryan's work hasn't found much support from Gabelich's colleagues.

During a discussion last month of revenue options presented by staff, three council members - Gary DeLong, Patrick O'Donnell and Gerrie Schipske - spoke against any tax increases.

In an interview, Mayor Bob Foster called looking at recent budget cuts and comparing it to money that would have been realized had the utility users tax not been halved "a bad juxtaposition."

"To be blunt, if we would have had the extra $40 million (those years), it would have been spent," Foster said. "The natural tendency of policy makers is to spend what they have."

Privatizing critical operations such as fleet servicing and refuse collection should be studied before officials consider increasing the utilities tax, Foster added.

"It's not our money, it's the public's money," he said.

"We have, and should have, a higher level of care in dealing with other peoples' money than we do our own."

The question of when council members would take up a tax raise is in some ways as important as if they would.

A general-use tax measure intended for the November ballot would require a unanimous vote of the council and a declaration of an emergency before Aug. 7 under state law, according to City Attorney Robert Shannon. It would then need to be approved by a majority of voters to be enacted.

A tax dedicated for a specific purpose requires a majority council vote and approval by two-thirds of voters.

On a city primary ballot, any tax measure needs a majority council approval and a two-thirds affirmative vote of the electorate for a specific purpose, or a majority vote of the people for a general-use tax, Shannon said. The next city primary election is in April 2014.

Citizens could also get an initiative on the ballot by petition.

Gabelich, who is termed out this year, said discussion about the issue is stymied because politicians are fearful of talking about raising taxes when they have to run for office.

"Somewhere along the line, I think people should be allowed to decide for themselves. I don't know what the fear is in that," said Gabelich, who talked about the utilities tax before she decided not to run again for her seat.

One downtown resident said if the choice were presented to him, he'd say no.

"It hurts too much already," said Ken Sumen. "I don't think that charging hard-working Americans more is the way to go."

To Baglietto, recent revelations by the city, such as $18 million in unpaid parking tickets, show that some lessons about the Measure J campaign are still unlearned.

"While I know the council and mayor have gotten the message," Baglietto said, "I think there needs to be more action by city staff."